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E-MailThis post is from Steven M. Haas of Hunton & Williams LLP. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.
One consequence of the M&A boom that charged into the first half of 2007 before sputtering out this summer is that it put the validity of deal-protection measures back in the spotlight. I co-authored a piece with Travis Laster in last month’s M&A Lawyer entitled Judicial Scrutiny of Deal Protection Measures that discusses several recent Delaware decisions focusing, in particular, on termination fees.
The Caremark decision, for example, balked at the notion that a 3% termination fee was reasonable per se, while subsequent decisions–namely Netsmart, Topps, and Lear–upheld the validity of significantly higher termination fees. (Editor’s Note: Our contributors give further background and analysis on Netsmart and Topps in posts here and here; analysis of Caremark is available here and here.)
The lesson for directors remains that the context of the deal always matters, and our article describes many of the typical justifications for deal protections that should be considered by boards and their counsel. We also build on recent court commentary on the issue of “equity value” versus “enterprise value” in reviewing termination fees under Unocal.
The full article is available here, and is being reproduced with the permission of Thomson West.
